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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI CHANDRA POOJARI & SHRI G. PAVAN KUMAR
आदेश /O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
These three appeals of the assessee was directed against the common order of the Commissioner of Income-Tax (Appeals)-2, Chennai dated 17.06.2016.
Since, issue in all these appeals are common in nature, these appeals are clubbed, heard and disposed off by this common order for the sake of convenience.
The first ground of appeal in ITR No.2194/Mds/2016 for the assessment year 2010-11 is with regard to reopening of the assessment. The Assessing Officer passed the order for the assessment year 2010-11 under Section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) on 13.02.2013, accepting the return of income. Subsequently, it came to the notice of the Assessing Officer, that the assessee has violated the conditions laid down in the recently inserted clause (e) of Section 80IB(10) of the Act which is applicable with effect from 01.04.2010. Since, the assessee has sold 20 flats to M/s. Indian Overseas Bank, which is not an individual, on that basis the Assessing Officer reopened the assessment for the assessment year 2010-11 by issuing notice under Section 148 of the Act on 03.04.2014, which is within the four years from the end of the assessment year 2010-11. Now, the assessee’s Ld. counsel strongly opposed the reopening of the assessment. According to the Ld. counsel, there is no tangible fresh material to reopen the concluded assessment and it is bad in law.
In our opinion, while the assessment was reopened within the four years from the end of the assessment year 2010-11 and there was a provision in the form of clause (e) to Section 80IB(10) of the Act , introduced by the Finance Act, 2010, which is applicable w.e.f. 01.04.2010, which reads as follows:
“not more than one residential unit in the housing project is allotted to any person not being an individual and”
As such, to give effect to the above provision, the Assessing Officer rightly recorded the reason for reopening and issued notice under Section 148 of the Act. Accordingly and validly, the Assessing Officer reopened the assessment. We do not find any infirmity in the reopening of the assessment. The same is confirmed. This ground of the assessee on this issue in the assessment year 2010-11 is rejected.
The next ground in all these appeals is, with regard to disallowance of benefit under Section 80IB(10) of the Act, to the assessee. In these assessment years, assessee claimed deduction under Section 80IB(10) of the Act. The same was rejected by the lower authorities on the reason that the assessee violated the provisions of clause (e) of Section 80IB(10) of the Act, as the assessee sold 20 flats to one assessee namely M/s.
Indian Overseas Bank, which is not an individual, on the other hand it is a public sector undertaking.
Before us, the Ld. counsel for the assessee submitted that the bank has purchased the 20 independent flats for residential usage of 20 individuals who are low or middle income group and the bank is owned and controlled by the Government.
There is no bar in selling the flats to public sector undertaking more so for the assessment year 2010-11, that provision cannot be applied. On the other hand, the Ld. counsel for the assessee submitted that there cannot be total disallowance of deduction under Section 80IB(10) of the Act. He pleaded that proportionate deduction under Section 80IB(10) of the Act may be granted. He relied on the following judgments. i) CIT v G.R. Developers in (2013) 353 ITR 0001, wherein held that when the act came into effect from 1st April 2005, it cannot be held with retrospective and it will be effective from subsequent to 01.04.2005. ii) CIT v CHD Developers Ltd. in (2014) 362 ITR 0177, wherein Housing project approved by local authority prior to 1-4-2005, are entitled to 100 per cent benefit of s 80-
IB(10) even in absence of completion certificate, since amendment inserted by Finance (No.2) Act of 2004, w.e.f.
1-4-2005 to s 80IB(10) was prospectively applicable. iii) CIT v Happy Home Enterprises in (2015) 372 ITR 0001 wherein Section 80-IB(10)(d) is prospective in nature and can have no application to a housing project that is approved before 31st March 2005. iv) He further relied on order of this Tribunal in the case of M/s. Elegant Estates in dt.
27.02.2015 wherein held that “Now, we come to other CIT(A)’s finding that assessee flats no.403 and 404 measure more than 1500 sq.feet i.e 1653 and 1572 sq.feet respectively. The assessee fails to rebut this factual position. Section 80IB(10)(c) prescribes measurement of a residential unit to be upto 1500 sq. feet only. We find that the language used in this specific clause refers the residential unit. In other words, this expression does not bar a deduction claim altogether if some of the units sold exceed the specified dimensions. We observe that in such a case, the consequential disallowance has to be proportionate only. It has to be restricted to profits derived from the residential units violating section 80IB(10)(c). Case law CIT vs. ARUN EXCELLO FOUNDATIONS (P) LTD (2013) 212 TAXMANN 342 (Mad) is also quoted in support. The assessing authority is accordingly directed to make proportionate disallowance and pass its consequential order.”
7.1 He also relied on the decisions of the Income Tax Appellate Tribunal Chennai in the cases of Arun Excello Foundations Pvt. Ltd., 108 TTJ 71 and Sanghvi & Doshi Enterprises Vs Income Tax Officer 131 ITD 151 (Chennai-TM).
7.2 He relied on the decision in the case Emgeen Holdings Pvt Ltd Vs Deputy Commissioner of Income Tax 12 Taxmann.com 468 (Mum), where sale of more than one residential unit to family members has been held to be not violative of Sec. 80IB as it stood prior to the amendment.
On the other hand, the Ld. Departmental Representative relied on the order of the lower authority and submitted that the assessee has violated the provision of clause (e) in Section 80IB(10) of the Act, which is applicable from assessment year 2010-11. Accordingly, he supported the orders of the lower authorities.
We heard both the representatives and perused the material available on record. In this case, admittedly, the assessee sold 20 flats to M/s. Indian Overseas Bank, which is not an individual. In our opinion, clause (e) of Section 80IB(10) of the Act is applicable from the assessment year 2010-11.
However, as held by Judicial High Court in the case of CIT Vs. Arun Excello Foundations Pvt. Ltd. 259 CTR 362, the deduction under Section 80IB(10) cannot be denied in toto. On the other hand, if there is a violation, only that income generated from sale of those flats not to be considered for deduction under Section 80IB(10) of the Act. In other words, deduction under Section 80IB(10) of the Act is allowable on pro-rata basis and 80IB(10) deduction to be granted accordingly.
Thus, we are inclined to remit the issue relating to the granting of deduction under Section 80IB(10) of the Act, in all the assessment years, to the file of the Assessing Officer for granting of deduction under Section 80IB(10) of the Act, on pro-rata basis
In the result, all the appeals of the assessee are partly allowed for statistical purpose.
Order pronounced on 6th January, 2017 at Chennai.